Ibex 35 companies closed 2023 with a net financial debt of 192,229.6 million euros. That’s close to 2 percent from what they recorded at the end of 2022. Non-financial groups of the main selector are increasing their debt due to new acquisitions and investments, which means higher financial costs. “Normal activity is returning after the break in 2020 and 2021. Companies’ investments are increasing, smaller acquisitions are being explored, new markets are being explored, interest rate increases are increasing the cost of debt. It is logical that debt is increasing,” explains iBroker Analyst Antonio Castelo.
The companies reporting the highest absolute debt figures were Iberdrola (47,832 million), Telefónica (27,349 million), Cellnex (17,600 million), Naturgy (12,090 million) or Endesa (10,400 million). On the other hand, companies that do not have negative net financial debt and whose cash exceeds their debt stand out. Some of them are Inditex with 11,500 million net cash, Logista with 2,500 million net cash or ACS with 400 million.. “Although the goal of many companies in Spain is to reduce leverage, this has increased due to the increase in rates, investments and new acquisitions. Also, much of this has come from large capitalization companies such as Iberdrola,” says XTB analyst Joaquín Robles.
Despite the increase in debt, converting some of it to a fixed rate and refinancing it covered the costs of many Ibex companies. The interest rate cut that the ECB plans to make from mid-2024 will ease costs and financing for groups. Since 2010, when the maximum debt of Ibex companies reached 202.692 million, This figure has fallen to levels of close to 190,000 million recorded in recent years..
“The Ibex 35 company has done its homework in recent years. Some of these companies had a very difficult time during the financial crisis, and overall their balance sheets are now very healthy.. They did not want to repeat the same experience and were prepared for a sharp rise in interest rates. “There are several Ibex companies with net cash, and many have benchmark financial leverage,” says Link Securities analyst Juan J. Fernández-Figares.
Antonio Castelo points out that the ratio between net debt and EBITDA (a company’s earnings before interest, taxes and depreciation) is as follows: Ibex companies are currently much lower than in 2008. “This means that companies are now much healthier, despite the increase in net debt. Of course, if we make a comparison with other European stock market indices, the Ibex companies are all more leveraged in absolute terms, but this is because the Spanish stock market has businesses closely linked to debt, such as infrastructure, renewable energy or construction .These sectors require a lot of financing and produce fewer boxes than the technological or luxury segment,” says Castelo. IG analyst Sergio Ávila also points out that the ratio between debt and EBITDA remains below five in most Ibex companies; This is a very manageable level. “As long as a prudent assessment is made and risk factors are monitored,” explains Ávila.
Less profit in 2023
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Ibex 35 companies reduced profits by 9.59% to 51 billion 120 million euros in 2023. In the entire last year, a profit of 56,024.82 million euros was recorded, when the unstoppable rise in inflation, the war in Ukraine and the sharp rise in interest rates triggered commercial pessimism. Uncertainties have disappeared over the last few months, resulting in a slight decline. The increase in revenues of the companies that make up the main selector amounted to 664,659 million euros, 5.62% more than the 629,261 million euros they achieved in 2022. “Last year, the Spanish stock market gained more than 20% in value, as inflation gradually slowed down and inflation gradually slowed down. XTB analyst Joaquín Robles said: “The end of interest rate increases. “Although this is also a period of improving business results,” he says.
Among the Ibex 35 results that stand out with their poor performance, we should also include ArcelorMittal, whose profits fell by 90%. and lowers the selector’s overall evaluation. The company earned $850 million and managed to reduce its net debt by 30% to 2 billion 655 million euros. Also noteworthy are the negative losses of Telefónica (-892 million) and real estate companies Merlin Properties (-83.5 million) and Colonial (-1,019 million). This last company experienced a strong depreciation in its office portfolio. In the case of Telefónica, the restructuring of its British subsidiary Virgin Media O2 and the provision to cover ERE, which will affect 3,400 workers, weighed on results in 2023. During the presentation of the results, the company’s president highlighted the increase in ERE. Sales increased by 1.64% and profitability increased.